A follow up on dealing with dealers

Here’s a quick postscript to my earlier post on GM and Chrysler closing dealerships. A point I didn’t touch on in that post is that GM and Chrysler have approached the business of contracting their dealer bases differently. GM has tried to have an orderly wind down. Many of the targeted dealerships are in fact still open. In contrast, Chrysler took much more of a don’t-let-the-door-hit-you approach (Chrysler Dealerships Fight Closings, Wall Street Journal, Dec 31):

For months, many of the 789 dealers terminated during Chrysler’s bankruptcy restructuring have cried foul, saying they were entitled to stay in business despite the auto maker’s problems. As Chrysler continues to report dismal sales, industry experts and even a former executive question whether the company blundered by dropping so many dealers and giving them just over three weeks to wind down operations.

Jim Press, who served as Chrysler’s president and vice chairman until last month, said in an interview that he personally fought the dealership closings. “I saw it fraught with terrible issues and short-term sales cost as well as dislocation of customers,” Mr. Press said. “Dealers are [Chrysler’s] only customers, the reason we are in business. How do you eliminate your customer?”

It seems hard to blame all of Chrysler’s poor sales on their moves with the dealers. They had a poor selection of product and a suspect reputation for quality before they filed for bankruptcy and bankruptcy didn’t change that. In addition they shut down essentially all of their assembly plants while they went through bankruptcy. That left them with their pants down during the cash for clunkers program. People had an incentive to buy NOW but they didn’t have the inventory. Chrysler has also followed a different strategy than GM post-bankruptcy. GM is relying on its own know how and skills to pull through. The road to Chrysler’s salvation runs through Turin. Fiat’s small cars are supposed to save them but it will be several years before they are introduced in the US.

Finally, let’s face it, you have to think twice about buying a Chrysler because they shouldn’t have been saved in the first place. They were weak in the North American market before everything hit the fan. They have essentially no sales overseas. I am not saying that they are certain to fail, but it is a long shot at best.